ABSD Property Curbs

What is the intention of the Additional Buyer's Stamp Duty (ABSD) curbs ?
First, let's look at the policy measures introduced since 2010 to see the Big Picture:

Summary of policy measures in 2010 and 2011
Feb-10 ----- Introducing Sellers' Stamp Duty (SSD) on all residential properties and residential land that are bought after today and sold within 1 year from the date of purchase. Lowering LTV limit to 80% for all housing loans provided by financial institutions and regulated by the MAS

Aug-10 -----  Increased holding period for imposition of SSD from the current 1 year to 3 years. Increased minimum cash payment from 5% to 10% of valuation limit. Decreased LTV limit for housing loans granted by financial institutions from 80% to 70%

Jan-11 ----- Increased SSD period from 3 year to 4 years. Increase SSD to 16% within the first year, 12% within second year, 8% within  third year and 4% within fourth year. Lowered LTV from 70% to 60% for individual buyers and 50% for non individual buyers

Dec-11 ----- Foreigners and non individual buyers to pay additional buyers stamp duty (ABSD) of 10%. PRs owning one and buying second and subsequent property will pay ABSD of 3%. Singapore citizens owning two and buying third and subsequent property to pay 3% ABSD.

These are mainly demand-side measures---- calculated to discourage or defer real demand.
Remember that the govt also have supply-side measures----- land releases to ensure that developers can tender for plots to meet the supply spikes.
Ostensibly, the Dec 11 measures are anti-speculative since the ABSD targets additional purchase of properties beyond the 1st and it follows an incremental layering approach by the policymakers to prevent a bubble from forming in the property sector.

The only difference is that this time it discriminates  between SG citizens, PRs and foreigners with graduated deterrence's (ABSD).

Foreigner demand as a percentage of total transactions has risen from 13% last  year to 17% for 10M11. Recent data showed that foreigner buying activity had become increasingly broad based, moving into the mass and mid-end market segments, compared to the more high-end focus previously.
One way to look at the ABSD measures is to look at it as one of incremental policy layering ----- speculative  hot money from foreigners (corporate and individual) and  PRs being targeted was a logical policy outcome. Low interest costs, the high SGD and the desirability of SG as an attractive destination for HNWIs will facilitate hot money inflows which will gravitate towards properties; given the markets abhorrence for derivatives and hedge funds.

But, if the demand is genuine, that is if SG is so desirable to the HNWIs, would the measures be effective? IMHO, Yes, as it will skew foreigner demand towards the higher end sector ---- those who can afford high ABSD will be able to afford high end properties!! So the policy discourage speculation at the mid end and mass market sectors and is pro-SG citizens ( an important consideration during elections).
Foreigners from the United States, Switzerland, Liechtenstein, Norway and Iceland are exempt due to certain clauses in their free-trade deals with Singapore. However, buyers from these countries, excluding permanent residents, comprised only 1.7 per cent of all foreigner purchases of non-landed homes this year---- meaning that those most affected will be the Chinese, Indonesian and Indians.

What will the foreigners do, if they have to reside here for investment and biz reasons and cannot buy?
The answer is simple----- they will gravitate towards rental of properties!!

The other big question is one of timing----- why now?
Given the Eurozone uncertainties and the glacial pace of growth in the US, there is likely to be a period of  monetary easing (QE to be exact) and low interest rates in the West. Hot Money will flow to  Asia  eg HK, China, SG etc.....
So while the aneamic economic growth in Europe and the US slow global growth in trade terms, it will cause hot money to seek growth in faster growing Asia which has huge potential for economic growth due to domestic consumption arising from the surging population growth.
Hence, the direction of  hot money flows is not difficult to fathom----it will gravitate to where there is less controls.
SG due to its open and market friendly policies is a hot favorite.
The policymakers do not have a choice in coming up with the latest ABSD measures, if they want to slow down the rate of property price increases; given the drastic measures in HK and China.

Developers are of course "peeved" about the timing and the anti-speculative measures and are lobbying for their removal--- that is the raison detre for REDAS and it is no surprise that they do so.
Developers have come up with new tactics to keep sales going.
Latest BT update on Monday 12/12/2011, by Uma Shankari, says...

Other developers said it was 'business as usual' at their showflats, but admitted that sales were slower compared to a week ago.

For the most part, buyers are now waiting for prices to fall. Property agents noted that there was a 'steady flow' of potential buyers at showflats - but most left without buying anything.

This is even as many developers - including Far East Organization, Wing Tai Holdings and City Developments - are offering packages to offset the stiff new measures.

Far East is offering a 5 per cent relief package to affected buyers at all of its already-launched projects.

It will reimburse buyers 3 per cent of the unit price to offset the new stamp duty, and buyers will also get furniture vouchers worth 2 per cent of the flat price.

Wing Tai and City Developments are also offering relief packages at selected projects, BT understands.

.


But will property prices collapse 30%, as some analysts say?
That is NOT the intention of the policymakers; whom will adjust and recalibrate policies if the prices drop excessively.
IMHO, the policymakers seek a gradual incremental rate of property price rise------ not a collapse !!

Handing over the baton in China

According to Xinhua and reported by CNA , China will maintain property market restrictions and "prudent" monetary policies.

Many observers have their lenses zoomed in to the once-in-a-decade leadership changes.
No surprise on the "property market restrictions " as they were the fruits of  many incremental policies that finally managed to cool runaway property  prices. So any changes will be similarly targeted and incremental.

Xi Jin-Ping and Li Ke-Qiang are both groomed successors who have been given increasing exposures to policymaking and the top leadership changes should NOT be disruptive to the continuity in policymaking.

The signals sent out are therefore intended to ensure that 2 current "tenets":
-  Housing remains affordable
- Consumer prices (CPI) remain stable
remain in place even after the handing over of the baton. So it is very important that China do not give any nasty surprises here.

Monetary Policies and Fiscal Policies which has quite an impeccable record under the current leadership of Hu and Wen are likely to maintain "unswervingly " on course given the  signals sent out at the close of the annual Central Economic Work Meeting.


Let's look at the statements released after the meeting:

"the country will speed up the construction of ordinary commercial residential housing to increase the effective supply and promote the healthy development of the property market."

Since April 2010, China has imposed a raft of measures aiming to calm property prices. They include higher down payments, limits on the number of houses that people can own, the introduction of a property tax in some cities, and the construction of low-income housing.

The statement also said that :

"China will push forward the trials of property tax reform."

China introduced the property-tax trials in Shanghai and Chongqing at the beginning of the year as part of its efforts to curb skyrocketing home prices and contain asset bubbles.

Another part of the statement:

"China should appropriately handle the investment and financing, construction, operation and management of affordable housing projects, and progressively solve housing problems for low-income urban residents, newly-employed workers and migrant workers from rural areas."

The government has vowed to build 36 million units over the next five years in an effort to give more mid- and low-income households access to housing and stabilize runaway property prices, with 10 million units planned for both 2011 and 2012.

China's housing authorities said on Nov. 10 that the country has already met this year's goal of starting the construction of 10 million units.

This is what the incoming Li KeQiang said:

"The construction of affordable homes will help curb excessive price rises and fuel urbanization, which will in turn unleash consumption and investment potential and push the development of related industries,"

 VP Li Keqiang said in late November that the government should stick to its tightening measures over the property market and consolidate the regulative results it had achieved.

Hence the outcome of this meeting is no surprise.

More cities posted monthly home-price declines in October following the government's campaign to calm the property market.
In October, 34 cities in a statistical pool of 70 major cities saw declines in new home prices from September, compared with 17 in September, data with the National Bureau of Statistics showed.

This what the policymakers are trying to achieve: ----- a slowdown in the increase in home prices.
So the policymakers would not do an about turn now, when the policies are gaining traction. The policies have to be "calibrated" and the market would be monitored, the process of calibration via the feedback loop is a delicate balancing act.  However, if prices start plunging badly then policies would be adjusted incrementally

Gaming growth rates

A BT article today entitled...

"Gaming growth rates in Asia-Pac likely to moderate: S&P" by Grace Leong

says that in 2012:

- Singapore's net gaming revenue is expected to grow by 5-10% .

- Macau gross gaming revenue growth is 10-15 % .

The estimates were according to the analyst Joe Poon.

In the 1st 11 mths of 2011:

- Macau posted a 44 % jump in gross gaming revenues

- Singapore's net gaming revenues  soared 42 % to USD 5 b this year.

Regulatory uncertainties on  "junket approvals" and  "advertising" were cited as "dampers".

Excerpts...

While Singapore's two IRs have exceeded performance expectations since their opening last year, several factors including regulatory uncertainty and projected slower growth in Singapore's economy could put a damper on local gaming growth.

Singapore's latest move to tighten advertising regulations to ensure the two casinos do not target locals, and expectations that the government may introduce more of such measures to tackle problem gambling, may crimp local gaming demand, the report said.

But the duopoly held by the two IRs until 2017 would also provide growth opportunities for them. And if the Casino Regulatory Authority were to approve junket operating licenses next year, Singapore's gaming growth rates would likely be higher than the current projected 5 per cent to 10 per cent.

Amid credit tightening measures in China, the Macau market is expected to post stronger gaming revenue growth than Singapore next year because the opening of Sands Cotai Central, a 5,800 room casino development project starting next first quarter, will likely fuel demand and boost mass market growth.

Mr Poon said he believes bad debts aren't likely to have a significant impact on the credit profiles of gaming operators in Macau, as they have limited exposure to direct lending to VIP players.

'We expect more projects will start in the next few years in Cotai, but the city could face challenges such as inadequate infrastructure, labour shortages, and a cap on the number of gaming tables,' he said.

Elsewhere in the region, countries including Japan are likely to accelerate their plans to develop licensed integrated casino resorts to spur economic growth.

'We expect operators in the region, with their improving financial capacity, to aggressively bid for casino licenses and invest billion of dollars into gaming projects,' Mr Poon said.

'We consider gaming operators to be better positioned now than they were in 2008 to accommodate risks associated with investments in new gaming developments and any moderation in gaming demand,' he said.

He cited significantly improved cash flow from existing properties, 'resulting in a better balance between cash generating assets and assets under development'.

'As many of these assets move from the construction phase to stabilised levels of cash flow generation, they should provide operators with greater capacity to accommodate any unexpected moderation in gaming revenues or capital availability,' he said.

          BT

The report did not examine the effect of emerging gaming locations on SG; such as in Japan and the new Cotai strip in Macau.

However, B/Ss are expected to improve and be resilent...
 "As many of these assets move from the construction phase to stabilised levels of cash flow generation, they should provide operators with greater capacity to accommodate any unexpected moderation in gaming revenues or capital availability"

Comments on BT's interview with KReit's CEO

Today's BT, 9th Dec has 2 Letters to the Editor that gave very good rebuttals to Ng Hsueh Ling, CEO of KReitAsia regarding the remarks she made in interviews in 2 articles on Dec 6, as reported by Jamie Lee.

The 1st article was titled " K-Reit nudged parent to get hands on OFC" and the 2nd article
"K-Reit voting prompted query from MAS"

To make the whole discourse meaningful, I excerpted from BT with minimum cropping.....



1st Article excerpts...

It was K-Reit Asia that approached its sponsor Keppel Land to snap up Ocean Financial Centre (OFC). This was to have a say in rental negotiations now underway, get tax exemption and to lower the average age of its property portfolio. The dynamics behind the deal were revealed by K-Reit's chief executive officer Ng Hsueh Ling yesterday, even as the real estate investment trust faces criticism that the deal is too expensive at a time when the office market may soften. Ms Ng also rejected suggestions that Keppel Land got the sweeter deal. She noted that the $1.57 billion that K-Reit paid for Keppel Land's 87.5 per cent stake in OFC is still well short of the peak. 'If you look at the historic peak of the market, the highest transaction was about $3,120 (per square foot) for a plot of land along Robinson Road. We figured that $2,380 psf is very far from the peak, and it's one of the best buildings in Singapore,' said Ms Ng. 'How do we know the bottom? And to go out and get money in a bad market, people will say 'no'.' Ms Ng added that Keppel was not urgently looking to offload the property. 'They are in no hurry to sell,' she said. 'A lot of people have asked me who started the negotiations first. I wanted to buy OFC because I don't want it to be fully leased.' Some 20 per cent of the space in OFC is having its rental negotiated. She wanted to fill this space with tenants who wanted long-term leases, took up large amounts of space, and had a good credit backing. 'I didn't want Keppel to fill up the extra 20 per cent because Keppel is a developer. I want to fill up with Reit-like tenants,' she said. 'I can also wait for Keppel to fill up the space but you can't control the tenants and you will have to pay for a fully valued asset. If the market goes down, sorry, you would have paid at that price.' She remains very confident that the space will be taken up by such tenants. And despite the grim economic outlook, customers have not asked for cuts in the rent rates, with Ms Ng saying these are large firms and long-term players. Touching on the 17-for-20 rights issue to be used to foot the bill - a move that would be dilutive for existing shareholders - Ms Ng said cash calls are inevitable in order to grow the portfolio size, especially since purchases in the office space are big. 'Now that K-Reit is large in size, the chances of going out to do another rights issue will be much lesser than when it was smaller.' Early this year, the Reit asked the Inland Revenue Authority of Singapore (IRAS) whether all income coming from OFC could be exempted from a 17 per cent tax payment if the corporate ownership structure was changed to a limited liability partnership from a private limited structure, under which a company has to pay that amount of tax. The property trust was told by IRAS around June that this would be possible - making it the first time an office building here has been allowed such a tax exemption under this structure. This prompted the Reit to begin serious negotiations, Ms Ng said. With the purchase of OFC - which will not require K-Reit to spend money on asset enhancement initiatives - the average age of the properties in the portfolio will be lowered to 4.4 years, she added. 'No other Reit has that kind of age. It doesn't mean that being young alone is good. You must be young and in the right location,' she said, though she had no figures on the industry average. As for the compensation of Reit managers, Ms Ng argued that her remuneration is based on the performance of the Reit, noting that she needs to meet targets set for the managers. Acquisition fees paid to the manager are in the form of units that can be sold only after a year, which means that the manager has to watch the units' market performance. Ms Ng also defended the sponsor model that Singapore Reits operate under, noting that a sponsor provides a supply of assets to refresh the Reit's portfolio. K-Reit noted that sponsors are also aligned with the Reit as cornerstone investors, and that working under this model gives Reits access to bank funding.             BT

 2nd Article excerpts......

K-Reit Asia had conducted the voting over the purchase of Keppel Land's entire 87.5 per cent stake in Ocean Financial Centre via a show of hands to avoid the ire of minority investors, chief executive Ng Hsueh Ling told BT yesterday. This has prompted a query from the Monetary Authority of Singapore (MAS) - which regulates property trusts - on the proceedings of the unitholders' meeting, she revealed, though no subsequent questions have been posed since then. About a year ago, K-Reit had gone through a similar voting process to gain unitholders' approval for an asset swap with its sponsor Keppel Land. This had Keppel Land selling its one-third stake in Phase One of Marina Bay Financial Centre to K-Reit, while K-Reit selling Keppel Towers and the adjacent GE Tower in Tanjong Pagar to Keppel Land. But during last year's meeting, minority unitholders were upset with the decision to have voting done by poll, arguing that this voting method would silence the unitholders since institutional investors often hold a larger block of units. With poll voting, each share translates to one vote, whereas under a show-of-hands system, each person gets a single vote, regardless of the number of shares he holds. This year, about 350 unitholders present at the extraordinary general meeting were given the option to vote by poll or by show of hands. Minority unitholders can call for a voting by poll so long as this request is supported by unitholders representing at least 10 per cent of the units held by those present - as stipulated in the Reit's trust deed. But the poll request, led by an institutional unitholder and supported by a few retail unitholders, did not meet the requirement. To compound matters, K-Reit's chairman Tsui Kai Chong told unitholders there were proxy votes representing 46 million units that favoured the deal, before calling for unitholders who wanted a poll to register with the company. The 46 million units included votes from institutional investors whom K-Reit had met to discuss the deal during its roadshow, Ms Ng noted. 'Even if every single person present at the meeting had voted against, what the chairman had in terms of the positive proxies would have (seen the deal) more than comfortably passed through the poll,' she said. 'Since people who called for the poll didn't meet the requirements, we thought, 'why should we go against the trust deed and have our discretion?' People might say, why did you use your discretion? 'I guess we could never win it,' she added. The deal also won overwhelming support via a show of hands, with Ms Ng noting that the hands in favour were 'too many to count'. By Ms Ng's account, there were just six to seven hands raised to show disapproval of the deal. Voting through a show of hands is a practice that the Code of Corporate Governance no longer accepts as sound governance. This was reflected in the recent review of the Code, though the findings were announced two weeks after the deal was approved.             BT Click Read More to go to the Letters to the Editor

Electronic Proxy Process for Voting

The following announcement will hopefully make the proxy process more transparent.

Singapore Exchange (SGX) and Broadridge Financial Solutions have signed an agreement to introduce a new service for increased transparency, accuracy and efficiency to the shareholder communications and proxy process in Singapore.


The service is designed to support transition from paper-intensive to an electronic online interaction between listed issuers and their shareholders, both in Singapore and overseas.

The service will use Broadridge's shareholder communications suite of solutions that includes the automated capture of records from the shareholder register, the distribution of personalized communications including proxy forms, and a choice of voting channels, either online via a website or the more traditional printed mail.

The service will enable better reconciliation of voting activity by the corporate issuer and assurances to shareholders 48 hours prior to the meeting date.

The transformation to the new service will benefit issuers that include increased oversight, reduced printing and postage costs, improved authentication of voters, and a secure database to store shareholder preferences for future communications.

Broadridge Investor Communication Solutions, International President Bruce Babcock said that this agreement puts in place a strong foundation from which to further advance corporate governance in Singapore and transform the communications and voting process."

___________________________

My Thots....

Yet, to see the details and how it works.
But, glad that SGX has done something about the voting by Proxy process.
Sometimes at AGMs and EGMs, U wonder if the Chair will care to substantiate the Proxy votes "for" or "against" the motion.

High End Deals

Savills did a study of High End Deals in the Housing Market and this was reported by  KALPANA RASHIWALA in the BT,  in an article "High-end home deals fewer this year: study" , on 5/12/2011.



Non-PR Foreigner share in the high end condos in choice districts  and bungalows in Sentosa have increased according to Savills; said the BT article.

Breakdown by Nationality

 From BT

Reasons?
1) Chinese fleeing restrictions on property buying in their home market and instead parking their monies in Singapore's property market.

2) Investors fleeing the economic gloom in Western economies  to favour the relatively healthier economies in Asia.

3) Singapore is seen as a property buying destination in Asia for its transparency, political stability and relative safety----AAA rating in the eyes of these HNWIs.


Who are these buyers ?

Breakdown by Country

From BT

High End Apartments for Jan-Nov 2011

Indonesians

Have been the top buyers since 2007---- Up from 15.4 % in full-year 2010 to 16.4 % during Jan-Nov 2011. However, the 236 upmarket apartments/condos they have bought this year is about 35 % lower than the total number of caveats last full yr.

 Mainland Chinese

Their share of total buying doubled from 5.8 per cent to 11.8 per cent.

Their purcahses of of high-end apartments has risen from 136 for full-year 2010 to 170 in Jan-Nov 2011

Indians
They were the fourth largest foreign buyers of high-end apartments in Jan-Nov 2011, with 31 caveats or a 2.2 per cent share of total purchases.

They  did not  feature among the top five nationalities of foreign buyers in 2007

A longer-term comparison reflects a similar picture. The number of high-end apartments bought by Indonesians has roughly halved from 438 in 2007 to 236 in Jan-Nov 2011, while the number of caveats lodged by mainland Chinese has quadrupled from 43 to 170.

Sentosa Cove for  Jan-Nov 2011

Chinese are the biggest foreign buyers (PRs and non-PRs combined) of bungalows.

They purchased five of the total 20 bungalows transacted in Jan-Nov this year.

Singaporeans bought eight bungalows.

Non-PR foreigners have 35% of th share of purchases.

Average price of bungalows transacted on Sentosa Cove has risen 11.1 % from $1,910 psf on land area for full-year 2010 to $2,122 psf for January-November 2011.

In absolute dollar quantum, the average price per bungalow transaction has appreciated 7.7 per cent from $17.1 million to $18.4 million.

The total number of Sentosa Cove bungalows transacted has slipped from 54 last year to 20 in Jan-Nov 2011.

Breakdown by Region
From BT

My Thots.....

As long as SG remains an open economy, HNWIs will continue to invest in high end properties here.

Note, that Non-PR Foreigners need approval to buy landed properties outside of Sentosa.

Will Italy do the Full Monti?

The key to ringfencing the Eurozone from the effects of contagion now lies in the austerity packages being forged in Italy and Sapin under their respective new technocratic bureaucrats.

The technocrat govt in Italy has come up with a meaningful austerity package, in effect a decree called the "Save Italy" decree----- which if carried out will put Italy back on track and away from the grasps of the bond vigilantes.

Reuters  says the 30b Euros package will be presented to the Parliament today.

Dubbed as a "Save Italy" package by Monti, it aims to raise more than 10 billion euros from a new property tax, impose a new tax on luxury items like yachts, raise value added tax, crack down on tax evasion and bring forward measures to increase the pension age.

Welfare Minister Elsa Fornero,  broke down in tears while presenting measures in the package that will mean an effective cut in income for many pensioners.

The three-year package includes a controversial pension reform that will increase the minimum pension age for women to 62 starting next year and fall into line with men by 2018, by which time both will retire at 66.

The number of years that men have to pay contributions to receive their full pensions will also be increased from the current level of 40 to 42.

The package also raises the value-added tax (VAT) -- which has already been raised by one percentage point this year -- by two percentage points to 23 %,  from the second quarter of 2012.

The whole package will be passed as an emergency decree.


Monti has said he will  be renouncing his own salary as prime minister in a gesture of solidarity, as he called on Italian to amke sacrifices.
For the decree to be in force, Monti needs parliamentary approval within 60days.

The populist Northern League, the only major party in parliament opposed to Monti's government, has said it wants a referendum on pension reforms.

Will the Italian parliament do the Full Monty (i)  and get the "Save Italy" decree passed?